Blog: Now Buffett wades into PepsiCo debate
Dean Best | 3 March 2014
PepsiCo on front foot over calls for split
Famed US investor Warren Buffett has become the latest big beast on Wall Street to comment on whether PepsiCo should split in two.
The pros and cons of whether the Lay's chips and Pepsi cola should divide is a hot topic in FMCG circles in the US at the moment.
Activist US investor Nelson Peltz is pushing for PepsiCo to become two businesses, one focusing on food, the other on drinks. PepsiCo has stood its ground and said it is a better business as one. (It is incidentally, embarking on a quiet PR battle, alerting us to Buffett's CNBC appearance, for example).
PepsiCo's shareholder base is said to be split over the split. Buffett and his Berkshire Hathaway investment fund does not own shares in PepsiCo but, in an interview on CNBC today (3 March), the so-called Sage of Omaha was asked for his opinion on Peltz's proposals.
"I don't think I'd split it up," he said. "I think that Frito-Lay is an extremely good business. It’s a better business than the soft drink business, but I think the soft drink business is a good business too and I don't see any reason to split them up."
Peltz last week told CNBC he would take his case to the US food and drinks giant's shareholders.
On Thursday, PepsiCo issued a letter to Peltz and his investment fund Trian Partners in which it dismissed the US billionaire's plan as "financial engineering" that "erodes value for shareholders rather than creates value".
Peltz's plan has divided the market. Another PepsiCo shareholder, Don Yacktman of investment fund Yacktman Asset Management, told CNBC on Friday: "I'm yet to be convinced that Nelson Peltz's ideas are in the best interests for a long-term shareholder."
Yacktman pointed to the "synergy" between PepsiCo's food and drinks operations, although he added: "I don't see, when you have synergy, that the issue is splitting the company up. The issue is more in management and some changes that need to be made at that level. I would like to see improvement in the capital allocation process and objectivity. I don't see that [Peltz's plan] is the solution."
Today, analysts at Sanford Bernstein issued results of a survey of 100 investors on whether PepsiCo should split. It said 55% supported a break-up but most do not believe it will happen in the next year or two. It seems this one will run and run.
Danone completed its US$12.5bn acquisition of WhiteWave Foods this week. The move will roughly double Danone's presence in North America, where WhiteWave is a top four dairy player. ...
Premier Foods plc revealed today (28 March) it has secured a deal with its pension scheme trustees that will see the UK food maker reduce its pension burden....
Mondelez International has added Germany to the markets in which it is selling the thinner version of its Oreo biscuits first launched in China three years ago....
Hain Celestial, under the scrutiny of the investment community in recent months and facing some challenges in its domestic market, has announced another shuffling of its management pack....
FrieslandCampina, which today served up higher profits but lower sales for 2016, is ready to offload the last non-dairy business owned by the Dutch cooperative giant....
- Interview: Sir Kensington's on sale to Unilever
- Analysis: Post discusses rationale for Weetabix
- Interview: "Disruptive" snack brand Hippeas
- Who will buy Danone's Stonyfield business?
- Column: Why snacking is the new meal
- Unilever buys US condiments maker Sir Kensington's
- Tyson shops Sara Lee bakery, Kettle and Van's
- Dairy dampens Danone in Q1
- Icelandic to sell Saucy Fish Co. owner Seachill
- Nestle organic growth slows but beats expectations